After the original plan to monetise its oil pipelines through infrastructure investments (InvITs) was cancelled, the Ministry of Petroleum and Natural Gas has urged state-run oil and gas businesses to come up with alternative income generation proposals.
According to two people acquainted with the situation, monetization of receivables is one of the other possibilities being investigated.
“They’ve been asked to investigate the possibilities” (to do so). “They’ve been told to look at several options,” one of the officials quoted above said. The government has given corporations 15 days to submit their proposals, according to the official.
Oil and gas corporations would likely move portions of their pipes to separate InvITs and sell shares in these pipelines, according to the original concept. The corporations recently informed the ministry that generating money from pipelines through InvITs would be a costly way to raise cash, and the government decided to put the proposal on hold.
According to scientists, companies with excellent credit ratings can acquire funds more readily and at a cheaper cost, which is preferable to the return they would have to pay InvIT investors.
“For example, India’s National Highways Authority has many (road) assets but little creditworthiness, so money from InvITs is preferable for them, but the same may not be true for refineries.” According to another official, “you (oil and gas businesses) can receive loans at competitive rates and get capital from the business at pretty competitive costs.”
According to the official, when it comes to producing money and raising more capital from other sources, it is necessary to be innovative.
Officials said the government is not modifying the targets in response to the homage to the pipeline revenue plan, which could result in lower recovery or capital raising from fuel retailers.
Last year’s Union budget announced the government’s ambitious intention to monetize assets to boost financial resources for national infrastructure management. During the four years FY22-25, the total indicative value of the national digitalization pipeline for central assets has been assessed at $6 trillion.
A total of 3,930 kilometres of oil products and LPG (LPG) were also recognised for revenue generation during FY22-25, with 3,196 kilometres being product line assets and 733 kilometres being gas line assets. The Mangalore-Hassan pipeline (LPG pipeline) of Hindustan Petroleum Corp. Ltd. (HPCL) has been identified for revenue generation in FY23.
The monetization pipeline was created by NITI Aayog in collaboration with infrastructure ministries, based on the mandate for asset monetization in the Union budget for FY22.